By Gift Olivia Samuel, The Sight News
ABUJA—The Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) has again retained the Interest rate at 13.5 percent, amid the Coronavirus pandemic.
The decision which was taken on Tuesday in Abuja, saw the Committee retaining the Monetary Policy Rate at 13.5 per cent; Asymmetric corridor of +200/-500 basis points around the MPR; CRR at 27.5 per cent; and the Liquidity Ratio at 30 per cent.
The Sight News gathered that the Committee noted the continued rise in domestic prices; the glut in oil supplies and low oil prices in the wake of the current global shocks; exchange rate pressure and other domestic monetary and fiscal responses to the evolving crises and in view of the foregoing, decided by a unanimous vote to retain the MPR and hold all other policy parameters constant.
Making this known, the CBN Governor, Godwin Emefiele, said the Committee observed that not only will the COVID-19 pandemic result in health crises, it will also result in massive economic crises that will force many countries into recession, including the leading industrialised countries.
The MPC he said, underscored the COVID-19 pandemic as a public health crisis which will continue to undermine any monetary or fiscal stimulus unless appropriate measures are taken to trace, test, isolate and treat infected persons, in order to curtail the spread, while ensuring that the migration across the country is significantly reduced.
He therefore stated that the MPC called on the Federal Government to take the necessary steps to safeguard the population through close monitoring and emergency readiness measures to identify and care for infected persons in the country, including compulsory restriction of movement to curtail spread of the pandemic.
On the choices of tightening, loosening or holding, Emefiele said, “Tightening would result in a reduction in aggregate demand as a fall in disposable income results in output compression; whereas at this time, policy emphasis should be on stimulating aggregate supply and demand, both already weakened by COVID-19.
“With respect to loosening, whereas the Committee felt it would stimulate the economy in the short term, and boost aggregate supply and demand, the Committee nevertheless, was of the view that there was a need to be cautious in loosening given the fact that it would exacerbate an already worsening inflationary condition, resulting in massive pressure on reserves and the exchange rate.
“Based on the balance of these arguments, the MPC, in taking note of the recent actions already taken by the Management of the Bank in response to the COVID-19, resolved to allow time for the measures to permeate the economy while allowing the pandemic to wear out its plateau before deciding on further supporting policy measures to boost and strengthen aggregate demand and supply in the recovery phase of the economy.
“The choice to hold also considered the subsisting LDR and the DCRR policies, which sterilize excess liquidity in the banking system, hence an increase in the MPR would be counter-productive”, he stated.
The CBN Governor noted that an increase in MPR will be taken by the Deposit Money Banks (DMBs) as an invitation to increase lending rates, which will be most undesirable at this point in time when efforts are being made to avert a recession.
He added that a reduction in the MPR, will not encourage the DMBs to reduce lending rates, but other strategies of the CBN are making the DMBs to reduce lending rates in furtherance of the growth objective.